Foreign Banks To Enter The Operational Efficiency Of Commercial Banks In China

The internationalization of banking services is one of the major trends in the global economy. Especially, the foreign banks entry is one of the common features of the financial systems'structural changes in developing countries.International banks have been actives in China since the early 1990s, with a significant financial market liberalization and elimination of entry barriers. Nowadays, a growing number of foreign banks set up operational establishments in China, competing with China commercial banks. Therefore, it is reasonable to analyze the effects of foreign on the China commercial banking market as a whole.As time-series about foreign banks entry in China are short, it would be difficult to analyze any long-term effects of foreign banks entry. Therefore, all estimations have to be interpreted as short-term effects of foreign bank entry that may significantly differ from long-term results.The purpose of this paper is to empirical investigate the impact of foreign bank entry on the operation efficiency of China commercial banks with qualitative analysis and quantitative analysis, based on the theories of economic and finance.In existing situation analysis, this paper gives the relationship between the foreign banks share in banking market and the operation efficiency of China commercial banks, based on the current situation of foreign banks in China, the efficiency of China commercial banks, and the historical information of them. In the empirical analysis, our data is constructed from the annual financial figures including 11 China commercial banks and covering the period from 1997 to 2008.This paper, respectively, researches the relationship between the foreign banks entry and the operation efficiency of the large-size commercial banks, and the relationship between the foreign banks entry and the operation efficiency of the medium-small sized commercial banks.The paper is organized as follow: first a brief overview of relevant literature and a qualitative analysis is given, after which hypotheses are developed on the basis of literature and existing situation analysis, next the data and the methodology is described, then the results are estimated and finally conclusions are drawn.Generally, when all China commercial banks are pooled together, the result indicates that the operation efficiency of commercial banks is raised with a higher share of foreign bank in banking market. Specially, the medium-small sized commercial banks have better operation efficiency, when a sum of foreign banks entry China market.